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Where to put $50,000 and make money

Posted by blue_fastback (My Page) on
Sat, Mar 9, 13 at 14:47

I have a CD that just matured. It was earning a big 1.1%. It was the best rate I could find. CD rate are so poor I really dont want to put my money back in. I would like to earn more interest safely. I have a Vanguard account with different investments. One fund I have is VWAHX High Yield Tax Exempt Bond Fund. I dont have much money in the account but thought about putting my $50,000 in the account. It earns a decent return. I think it was around 6% last year. That fund has averaged about 7% since 1978. Is this a safe place to put my $50,000 and actually make money? All opinions welcome


Follow-Up Postings:

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RE: Where to put $50,000 and make money

From Vanguard...
"The fund’s lower credit quality may provide a higher yield, but it makes the fund more susceptible to price volatility due to uncertain prospects for the bond issuers. Investors who are looking for a fund that may provide sustainable federal tax-exempt interest income and can tolerate moderate risk to principal may wish to consider this fund as a complement to an already diversified fixed income portfolio."

Sooo,
if you can handle high volatility,
if you can tolerate moderate risk to your principal,
and if you are already diversified...

go for it!

If not, look for something else.


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RE: Where to put $50,000 and make money

What ever you decide, just make sure it is federally insured.


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RE: Where to put $50,000 and make money

"What ever you decide, just make sure it is federally insured."

Ummm... nothing related to stocks and bonds are.


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RE: Where to put $50,000 and make money

Look into some MLPs - Kinder Morgan, LNCO, Energy Transfer Partners, Enterprise Product Partners, to name but a few and the list goes on. (I have no business relationship with any MLPs beyond buying into them as an individual private investor.)

By US code, MLPs are "limited to enterprises that engage in certain businesses, mostly pertaining to the use of natural resources, such as petroleum and natural gas extraction and transportation."

They make for a nice portfolio diversification. At one time municipal bonds did too - but there's no percentage in going out 30 years for 2-3% interest. The muni market might be over for years to come.

The dividends on the MLPs are very good. The only slight drawback I find is waiting for the K1s to arrive - sometimes very late in March. If you're acustomed to doing your taxes early, you can forget that unless you like doing amended returns.


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RE: Where to put $50,000 and make money

But losing money is related. I have talked to enough investors to know there are federally insured options out there. I don't invest in spite of their pushing. When they understand that I don't gamble with my savings... they start suggesting investments with that option. Principal is more important than interest as far as I am concerned. My Sis lost $50,000 and my friend's husband lost the same. My Sis got completely out. I told both of them before hand, but of course they didn't believe me.

This post was edited by EmmaR on Sun, Mar 10, 13 at 12:52


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RE: Where to put $50,000 and make money

You have to take risks to make money. That means investing.

Keeping it in most banks DOES what you want, EmmaR - protect your principal - but the interest doesn't even keep pace with inflation nowadays.

Please share those "federally insured options" for stocks and bonds...


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RE: Where to put $50,000 and make money

Your sister and friend seemingly made a bad investment and learned the hard way that "past performance is no guarantee of future results". But, is there some confusion with the SIPC? A federally mandated corporation to protect investors in certain securities from financial harm if a broker-dealer fails.

Treasuries are backed with full faith and credit, but interest rates have flatlined - even worse than the OP's CD.

When you've got idle money laying around falsely considering it a hedge against losing principal, as LuAnn said, you're really losing ground.


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RE: Where to put $50,000 and make money

You may want to consider brokered CDs. Such CDs are issued by banks to brokerage houses which sell to its customers. Basic features include larger denominations, longer terms and higher interest rates.

As with any CD, ensure that the issuing bank is solid even though brokered CDs are insured by the FDIC. Terms can easily be 20 years although shorter terms are available. Some CDs are callable; others are call protected.

You can buy these through traditional brokerages as well as discount houses like Schwab, Scottrade, Fidelity, etc.


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RE: Where to put $50,000 and make money

What kind on interest does the brokerage cd pay? I looked at vanguard Cd's and the rate was terrible.


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RE: Where to put $50,000 and make money

I don't think it is worth the risk and the worry. It's your security you are gambling with. You will be wishing you had put it in a CD if you lose it all. I know it's old fashioned thinking but gambling is what the stock mark is all about. Plus the fact that most people use a broker and I will never give anyone the control over my life savings. When my husband retired he said his friends at work recommended he use a certain broker. I asked him if he knew what that meant and he said no. I explained and you should have seen the look on his face. He said you take care of it.


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RE: Where to put $50,000 and make money

A "broker" means a brokerage company, not necessarily an individual. Many (most?) people do their own stock/mutual fund purchases thru low-cost brokerage companies such as e-trade, ScottTrade, Schwab, etc. The securities are held in your account with the company.

Honestly, Emma, your information is very out of date.


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RE: Where to put $50,000 and make money

Are you saying that if I choose a brokerage to handle my investments, that no one in that company has access to my funds, that they can't steal them? If that is true then my information is wrong.


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RE: Where to put $50,000 and make money

Ok, first things first. You need to decide roughly how much risk you are willing to take. This would be based on your age/closeness to retirement, what percentage of your savings this money represents, your risk tolerance, etc.

Then you have to decide if this is as good time to jump in. You don't have to wait for an ideal time, but if you think we are due for another "adjustment" in the economy in the next year or less, you would want to wait for the adjustment to occur then get in. If you think we are going to continue to head upward, then by all means the sooner the better. Now this is not on a day to day or even week to week basis, but overall trending. Nobody knows the answer to this, this is where even the most conservative investors have to gamble, especially when investing a lump sum. When you buy a little at a time, like paycheck deferral, you get "dollar cost averaging" where you are buying shares regularly as the price goes up and down, so some shares you own you bought a lot cheap and some you paid more for a few.

If you just want to toss the money in someplace relatively safe-ish and leave it there, the Vanguard Total Market Index is a great choice. Leave it there for a while while you educate yourself on financial matters.

You don't need to agree with them, but listen to Ric Edelman, Bob Brinker, or Dave Ramsey on the radio for a while. Listen to the way they think about things, the lingo, the thought processes. You will pick up a lot. At the very least, you will know enough to ask good questions if you seek professional assistance, what to look for in professional assistance, and much more.

If this money is all your savings, I'd keep at least $1k easily accessible in a bank as an emergency fund, for actual emergencies. Then most advocate for 3-6 months living expenses in a safe investment. Then anything left you can take enough risk to grow and invest somewhere based on your risk tolerance.


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RE: Where to put $50,000 and make money

"Are you saying that if I choose a brokerage to handle my investments, that no one in that company has access to my funds, that they can't steal them? If that is true then my information is wrong."

A brokerage house will hold the funds/stocks/etc in your name. You do not need to use or pay a broker unless you wish to, you can make the investment decisions on your own without help. And no one would have access to your funds except you.

There is a difference between paying extra for a human broker to give you advice and investing thru a brokerage company on your own. And even then the broker does not have access to your money, altho he/she can make poor decisions.

Bernie Madoff was NOT acting as a brokerage house for the people he bilked. He was just taking their money and lying.


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RE: Where to put $50,000 and make money

Williamsem, all good advice, Thank you. It would require some study and research. I think age is very important, especially when it comes to the retirement age. If I were younger and had enough it would be interesting to invest a certain amount of my savings. Like going to Vegas and gambling a bit. At retirement age the savings are very important. You either need it to live on or if you have enough it's time to enjoy it and I do. I spoke to a broker.....excuse me an investor and when he got persistent, I told him I want it where I can get my hands on it without worrying if the time being right or worrying about the taxes I will have to pay on the money I spend. I have seen my friends and family do that. They can't enjoy a simple vacation without worrying about spending money. Everyone talks about earning money on your savings and that would be nice. Well you have already earned it now you need to take care of it.

I don't need my savings to live on but I am da** well not going to lose any of it by trying to earn more than I need. I have shifted from save and earning more to spending it. I have talked to my accountant about a level I can spend down to, she confirmed what I thought. So it is my birthday every day and I celebrate each and every birthday.


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RE: Where to put $50,000 and make money

Fidelity publishes its brokered cd rates at the linked web page.

The highest rate is Wells Fargo, 20 year term @ 3.125%.

Again, ensure that you won't need the money within the 20 year period and check out the safety rating of any bank whose CD you buy. Also, note that some CDs are callable and some are call protected.

Here is a link that might be useful: Fidelity Brokered CDs


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RE: Where to put $50,000 and make money

Hi blue fastback,

I'd say that a good deal depends on how long before you figure that you'll need the money.

Sometimes I liquidate some asset to use the money to buy something that I want.

But I have two lines of credit, using some of my stocks or mutual funds as collateral, one for consumption items, and one for investments (as the interest paid receives different tax treatment).

If I expect to be able to replace the money soon, I may well use the line of credit, and leave the earning assets alone, to keep on earning, paying off the loan over the short term.

I liked to have my dollars work for me, as well as my hands and head, before my retirement ... but now it's just the dollars working (and the pension income: from earlier investments).

Our governments owe huge debts ...(much of it to Chinese ... but the Chinese are less enthusiastic about holding your bonds, recently: will they get paid?).

Our Minister of Finance tells how he wants to keep interest rates low ... so our entrepreneurs can build factories and put people to work. But many of our entrepreneurs have quite a lot of money in hand ... and aren't deploying it, in this area.

The Minister doesn't mention that the government owes so much money ... and doesn't want to pay high rates of interest on those loans.

But when our seniors earn only about 2% interest, and pay a quarter of that in direct tax, it leaves them with about 1.5% ... and inflation is said to be running at 2% ... but have you bought groceries, lately?

A few weeks ago the provincial department of our national public radio had a phone-in, as they do weekdays for an hour at noon, and asked whether we were better off now than four years ago. I don't recall how much mention was made of the 4 years ago being late 2008 and early 2009, when the stock market took a beating.

I said that I was better off ... but only because I disobeyed the advice of many financial experts, saying to buy equities when young, when you can stand some short-term reductions in value, with a view to gain over the span of many years till you retire. But when you retire, you can't stand short-term losses ... for your game is all short-term!

I sold mutual funds (for a broker, offering the products of a number of managers, not just their own) for a short time, almost 30 years ago.

In '84, a number of folks told me gleefully how they'd made about 18% on some of their money, recently (Canada Savings Bonds offered 19% in 1981).

I aked them how they liked making about $2, - 3,000.00 on $100,000. invested ... and they said they were making far more than that.

I said that they had to talk to the income tax people about those interest earnings (taxed at a high rate) before they could call them their own, and if they paid 25%, that'd take their after-tax retention down to about 14.5%.

And did they know what the rate of inflation was, that year? Most didn't - it'd been about 12%.

So they were left with about 2%, after the erosion of income by taxes and of their equity by inflation, if it was in principal, where the number of dollars invested was guaranteed not to shrink (so it wouldn't grow, to keep up with inflation, either).

At age 80 plus, and having lived in about 22 locations, I've never owned a home. Having taken the course that stockbrokers take, about 30 years ago, and six courses leading to a financial planner certification (only passed 5), I have about 80% of my assets in equities.

If you go to Yahoo, Finance, when you enter "JNJ" in the dialogue box labelled "Get quotes" in the upper left corner, they'll give you quotes for "Johnson & Johnson" and other current information about the trading.

On the right, you'll see a chart that tells the changes in price of a share during this day, and if you look under, you can find links for several days, months, or years. If you click on 1yr, you'll get a chart showing the price fluctuations for the most recent year ... which have gone up, down, and sideways. Try it for "5 yr".

If you look in a list on the left of various situations relating to that stock, you can usually find one that shows dividends paid , and you'll find when you check it that they've been rising, over the years.

As has the price of the stock - long term.

I am NOT RECOMMENDING that you buy JNJ - though it is a quality stock, most agree ... or that you don't, either, by the way. That talk was just to show you how to get quotes and begin evaluation of one stock.

ole joyful


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RE: Where to put $50,000 and make money

Hi blue fastback,

I'd say that a good deal depends on how long before you figure that you'll need the money.

Sometimes I liquidate some asset to use the money to buy something that I want.

But I have two lines of credit, using some of my stocks or mutual funds as collateral, one for consumption items, and one for investments (as the interest paid receives different tax treatment).

If I expect to be able to replace the money soon, I may well use the line of credit, and leave the earning assets alone, to keep on earning, paying off the loan over the short term.

I liked to have my dollars work for me, as well as my hands and head, before my retirement ... but now it's just the dollars working (and the pension income: from earlier investments).

Our governments owe huge debts ...(much of it to Chinese ... but the Chinese are less enthusiastic about holding your bonds, recently: will they get paid?).

Our Minister of Finance tells how he wants to keep interest rates low ... so our entrepreneurs can build factories and put people to work. But many of our entrepreneurs have quite a lot of money in hand ... and aren't deploying it, in this area.

The Minister doesn't mention that the government owes so much money ... and doesn't want to pay high rates of interest on those loans.

But when our seniors earn only about 2% interest, and pay a quarter of that in direct tax, it leaves them with about 1.5% ... and inflation is said to be running at 2% ... but have you bought groceries, lately?

A few weeks ago the provincial department of our national public radio had a phone-in, as they do weekdays for an hour at noon, and asked whether we were better off now than four years ago. I don't recall how much mention was made of the 4 years ago being late 2008 and early 2009, when the stock market took a beating.

I said that I was better off ... but only because I disobeyed the advice of many financial experts, saying to buy equities when young, when you can stand some short-term reductions in value, with a view to gain over the span of many years till you retire. But when you retire, you can't stand short-term losses ... for your game is all short-term!

I sold mutual funds (for a broker, offering the products of a number of managers, not just their own) for a short time, almost 30 years ago.

In '84, a number of folks told me gleefully how they'd made about 18% on some of their money, recently (Canada Savings Bonds offered 19% in 1981).

I aked them how they liked making about $2, - 3,000.00 on $100,000. invested ... and they said they were making far more than that.

I said that they had to talk to the income tax people about those interest earnings (taxed at a high rate) before they could call them their own, and if they paid 25%, that'd take their after-tax retention down to about 14.5%.

And did they know what the rate of inflation was, that year? Most didn't - it'd been about 12%.

So they were left with about 2%, after the erosion of income by taxes and of their equity by inflation, if it was in principal, where the number of dollars invested was guaranteed not to shrink (so it wouldn't grow, to keep up with inflation, either).

At age 80 plus, and having lived in about 22 locations, I've never owned a home. Having taken the course that stockbrokers take, about 30 years ago, and six courses leading to a financial planner certification (only passed 5), I have about 80% of my assets in equities.

If you go to Yahoo, Finance, when you enter "JNJ" in the dialogue box labelled "Get quotes" in the upper left corner, they'll give you quotes for "Johnson & Johnson" and other current information about the trading.

On the right, you'll see a chart that tells the changes in price of a share during this day, and if you look under, you can find links for several days, months, or years. If you click on 1yr, you'll get a chart showing the price fluctuations for the most recent year ... which have gone up, down, and sideways. Try it for "5 yr".

If you look in a list on the left of various situations relating to that stock, you can usually find one that shows dividends paid , and you'll find when you check it that they've been rising, over the years.

As has the price of the stock - long term.

I am NOT RECOMMENDING that you buy JNJ - though it is a quality stock, most agree ... or that you don't, either, by the way. That talk was just to show you how to get quotes and begin evaluation of one stock.

ole joyful


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RE: Where to put $50,000 and make money

VWAXH is a high yield municiple bond fund, which means its return aren't subject to federal taxation. However. Morningstar rates its risk as higher than average for that category of funds as well as higher than average in rate of return for that category.

You also might want to check out a similar exchange traded fund, Market Vectors High-Yield Muni ETF
(HYD) for comparison purposes because it carries a somewhat lower risk. You should realize, though, that owning funds like these (I myself own some HYD and it has done quite well, especially when compared with CD yields, money markets, or Treasuries) isn't risk risk-free and the asking price can drop quite a bit in a short time.. Don't put money in them that you might need to access right away.

Also, 2013 is unlikely to be as good a year for bonds because the stock market is so strong. Also, if you're not in a higher tax bracket and don't benefit so much from munis' special tax status, then you might be better off with comparable high-yield corporate bond funds.


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RE: Where to put $50,000 and make money

Think the OP might have lost interest in the thread.


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RE: Where to put $50,000 and make money

Well, there are many ways to invest it my friend. But if you want it to be more safe yet earning an ample interest, keep it in a bank.


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RE: Where to put $50,000 and make money

What FDIC-insured bank gives you an "ample interest"?


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RE: Where to put $50,000 and make money

LuAnn, CDs are still the best interest bearing FDIC-insured investment that I am aware of. However, for a short term that still means under 1% (Ally online seems to have the highest rates right now). Keep in mind why that is - since the fed is keeping prime rates so low, it is cheap for banks to borrow money from each other versus pay you high interest to keep your money in their accounts. Once the prime rate rises, so will CD rates, savings rates, checking account rates, etc. However, last I heard, the federal bank was keeping rates low until next year, although that can change suddenly if the economy picks up. If you are wanting to stick to FDIC insured then put money into a year CD and then hopefully next year at the time, rates will be higher and you can put money into a longer term CD.


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RE: Where to put $50,000 and make money

Yeah, I know.

However, under 1% is NOT "ample interest", nor does it allow you to make money (which IS the title of the post).


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RE: Where to put $50,000 and make money

Unfortunately then you will have to deal with non FDIC insured products. FDIC only covers bank deposits so products such as listed above and no bank will pay you high interest when it can borrow for close to nothing. Double edged sword these low rates - great for anyone getting a mortgage, terrible for anyone with some savings they want to invest that has little risk. Treasury bonds which are also very safe also have terrible rates right now. There won't be a great answer unfortunately. Either increase the risk or wait a bit until rates change.


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RE: Where to put $50,000 and make money

There are two rats that eat your cheese.

One agency comes annually to almost all of us (except the *very* low income ones), with a question and a statement.

The question is, "How much did you make?" and the statement is, "We want part of it" ...

...except that there are some who earn substantial amounts, whose tax-accountants and tax-lawyers can help them avoid much of the fee.

That's the rat of income tax - that eats annually into your income.

The other rat is called inflation.

Just after World War II, which ran from Aug. '39 till Aug '45, when cars were really hard to get, as there'd been none built for civilians during the war, Dad had a new Ford "Monarch" on order for many months, then the dealer told him that it would cost him $1,600.00 ... but that the (honest) dealer could sell it to another customer for him, if he chose, for $2,000.00, tomorrow. Dad said that he'd take it.

When we invest where the guarantee is that the number of dollars invested won't go down ... there's another guarantee: that the number won't increase, either, apart from the rent on the money.

And in almost all of the more than 80 years that I've been alive ... each of those dollars would buy less when we got it back than when we gave it to the borrower.

Many people spend more time planning their vacation than learning how to manage their money effectively ...

... some stupid, that, I say.

And many of the governments, deep in debt, can't afford to have interest rates go up.

Plus ... many of them are printing money ...which means that inflation will go up.

When my jacket shrinks enough through repeated washings ... it gets darn hard to breathe!

ole joyful


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RE: Where to put $50,000 and make money

How about buy a classic car and insure it. If anything happens then you collect insurance and in ten to twenty years it should go up in value. If that doesn't work then atleast you'll have a cool set of wheels :)


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RE: Where to put $50,000 and make money

As far as I know, insurance companies don't put a higher value on classic cars.

We have a Certified Financial Planner and pay him a flat fee. We have done very well. In comparison, my brother limits himself to CDs and bonds. He has not done well, and I worry about how he will support himself in 20 years. A balance between "safe" and "risk" is important if you don't want to fall behind.


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RE: Where to put $50,000 and make money

If you have a classic car worth value then it's fully insurable for the amount it's valued at (often times, rare classic cars are insured for more than auction may bring) my point is, if a tornado or something wiped the car out, insurance would cover the value of the car less the deductible. Also, insurance on rarely driven classic cars are usually very reasonable and often times cheap rates.

If nothing happened to the car then it's my belief with time (like 10-20 years) that the car would increase in value (aka investment).

Another plus, you'd have a kick a$$ car sitting the garage and you could enjoy it on a nice sunny day.

But yeah, go throw all your money in a CD and have fun...


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RE: Where to put $50,000 and make money

I just noticed the name of the original poster... Nice!


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